Course details
Principles of Derivatives Pricing
FINA 60211A
The structures and assumptions of standard derivatives securities models are explored in details. The student's critical judgment on the evaluation and use of derivatives is developed. The course is divided into three parts: 1) The lognormal model of stock prices through a conceptualization of derivatives as expected values of future cash flows; 2) Principles of derivatives pricing through dynamic replication approaches; 3) Financial distress cases related to the use of derivatives and the lessons that can be learned for managers of financial and non-financial enterprises.
Themes covered
- Motivation structure and organization of the course
- Preliminary concepts
- Binomial model
- Calculations with normal and lognormal distributions
- Lognormal price model
- Risk measures and other uses of Black-Sholes
- Corporate application: corporate debt and default risk; warrants convertible bond; structured products; real options and investment decisions
- Exotic options: pricing by simulation;
- Overview of derivative pricing models
- Brownian Motion and Ito's Lemma
- Risk-neutral process and forward pricing
- The Black-Scholes equation
- American options and introduction to real options
- Financial disasters and derivatives: lessons from recent history
Important notes
Course in French : FINA 60211
Course code
FINA 60211A
Subject
Finance
Program
Maîtrise en gestion (M. Sc.)
Instruction mode
On-site learning
Credits
4